Basically, there are just a few types of stocks in the stock market. These are: Blue-chip; Growth; Defensive; Cyclical; Penny; Dividend; and, Speculative. Of course, there could be many more types of stocks that may not be as important as these.
Blue-chip stocks are impressive stocks of blue-chip companies or corporations that come with huge capital structure. They belong to renowned business houses with remarkable history of consistent performance and long-term growth. These are well established, and stable and investment in those stocks are comparatively safer, so to say. Some of the best examples of blue-chip stocks are credit and debit card companies like Visa and Mastercard; and other popular brand names such as Coca Cola, Disney etc.
Growth stocks are stocks that are expected to grow at a faster rate than the average growth rate of other stocks in the market. Usually, growth stocks belong to innovative companies that have some kind of novelty about their products. The products that they deal in are immensely popular and lapped by the public at large. They are generally successful ventures so long as their products remain in vogue. Amazon, Google, Tesla, Netflix, Pinterest are some companies that fall under this category.
Defensive stocks are stocks that are less sensitive to market conditions. Normally, they deal in products of daily use which have a consistent demand and there’s no way the demand for those products could come down. That ensures stable earnings regardless of the trend of the overall market. Prominent business houses like Walmart, Target, McDonald’s are known for this kind of stocks.
Cyclical stocks are affected by macroeconomic or systematic changes in the overall economy. Business performance of such stocks are influenced by economic developments at the national or global levels. Returns on such stocks follow the cycles of the economy. It follows the cause-and-effect theory of economic conditions and developments related to that. Some of the best examples of cyclical stocks are: Honeywell, Delta, etc.
Penny stocks are stocks of small companies that typically trade less than $5.00 per share and are known to be volatile. These stocks call for low investment. In the spring season of stocks of these stocks, they may pay rich dividends. Sometimes, they bring far more returns than one would expect. Some penny stocks have surprised the best of speculators with crazy returns. For this kind of stocks, you have to scan the stock listings of the stock market.
Dividend stocks have a track-record of paying out regular dividends to share owners. Business houses of this type are often marked by slow growth and consistent dividends. Outstanding examples of such stocks are: Discover, Pepsi, AT&T, Johnson & Johnson, etc.
Dividend Rooks are stocks that register excellent growth as well as growing dividends. Companies such as Microsoft, Costco, Starbucks etc. represent this kind of stocks.
Speculative stocks are those which may seem risky, but have great potential not yet realised. Companies such as Uber, ‘Beyond Meat,’ etc. fall under this category of stocks.
It is always advisable to acquire some basic knowledge about the stock market and stocks before you start poking your nose into stocks!
